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Jens 'n' Frens |
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Greg Mankiw notes an article I've been meaning to point out:Standard & Poor's, Moody's Investors Service and Fitch Ratings are all refusing to allow their ratings to be used in documentation for new bond sales, each said in statements in recent days. Each says it fears being exposed to new legal liability created by the landmark Dodd-Frank financial reform law.I think Dodd and Frank specifically avoided doing anything about most of the actual causes of trouble when they wrote their bill (though their bill does make it harder for poor people to get credit, and offering too much credit to poor people was a source of systematic risk), but it would be wrong to say that they merely intensify the causes of the financial crisis, which was not really created by regulatory uncertainty. The failure of the economy to recover may have been partially driven by regulatory uncertainty, but I don't think the 2008 financial meltdown was (actually, long-term uncertainty of any kind was less a factor than is widely believed; I've been told that if you look at implied option volatilities from the fall of 2008, the short-term options indicated a lot of uncertainty, but the longer-term option prices indicated that investors expected the uncertainty to be resolved fairly quickly). |
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